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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29569
Experience:  Taxes, Immigration, Labor Relations
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Can liability self employment tax be expunged by bankruptcy?

Customer Question

Can liability for unpaid self employment tax be expunged by bankruptcy?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Yes - self-employment and income taxes are combined on your tax return - and the total amount may be discharged in bankruptcy processing.


If the tax debt meets all five of these rules, then the tax debt is discharged in bankruptcy petitions.

-The due date for filing a tax return is at least three years ago.

-The tax return was filed at least two years ago.

-The tax assessment is at least 240 days old.

-The tax return was not fraudulent.

-The taxpayer is not guilty of tax evasion.

Please verify your situation.

Customer: replied 1 year ago.
it seems that liability for older SET can be eliminated, but more recent liability can not. Still a gotcha.
Expert:  Lev replied 1 year ago.

In such situation your bankruptcy attorney most likely will advise to WAIT before filing your bankruptcy petition - so you would be able to include most of your tax liability.

Customer: replied 1 year ago.
In the mean time one must pay currently for three years then have the eligibility. This could be a problem for cash strapped party. Other options?
Expert:  Lev replied 1 year ago.

There is NO other options to include the tax debt into the bankruptcy petition unless all listed above requirements are satisfied.

Expert:  Lev replied 1 year ago.

Other options would be to have an installment plan with the IRS - but that will cover the FULL amount - so after the bankruptcy is finalized - you might want to change the installment plan.

Or you may apply for the installment plan AFTER the bankruptcy is finalized.

Offer in Compromise could be the last resort.

Let me know if you need details.